Revisiting the diagnosis of intertemporal preference reversals

Zhihua Li, Graham Loomes

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Abstract

Intertemporal preference reversals occur when individuals choose future option A over future option B in a direct choice between the two but place a higher ‘immediate cash’ value on B than on A. Tversky et al. (1990) reported strong evidence of such reversals, which they attributed mainly to valuation biases rather than intransitivity. We find similar levels of reversals, even after adjusting for considerable degrees of variability and imprecision in people’s responses. However, we disagree with Tversky et al.’s conclusions about the causes of the majority of these reversals. We find substantial levels of intransitivity in respondents’ binary choices as well as differential overvaluation of both options relative to the values inferred from their choices.
Original languageEnglish
Number of pages23
JournalJournal of Risk and Uncertainty
Early online date10 Mar 2022
DOIs
Publication statusE-pub ahead of print - 10 Mar 2022

Bibliographical note

Not yet published in issue as of 15/03/2022.

Keywords

  • intertemporal choice
  • preference reversals
  • decision experiment

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